Capital in the Twenty-First Century

by astanhaus


If The Goldfinch was the must-read of Fall 2013, Spring 2014’s must-read is Capital in The Twenty-First Century by Thomas Piketty. This frenchman is a MIT-trained economist (this means he’s good, very good) and with his 600+ page book, he has changed the discourse of the economics profession forever.

While my kindle tells me I have many hours to go, I wanted to share the highlights from the book reviews now. Later on, I will sum up the book myself.

Fellow MIT- trained economist, Paul Krugman reviewed the book for The New York Times and outlines Piketty’s argument:

  • We need to watch out for continued income disparity, not from unequal wages, but from unequal ownership of income-generating assets.
  • Income disparity happens when r>g. Ideally, we want them to be equal.
  • r is the rate of return on capital, AKA interest rate.
  • g is the rate of economic growth, AKA rate of change of GDP.

Historically, when r>g, “the past tends to devour the future.” Trust fund babies dominate.

While trust funders are still important players today, so are a new breed, the hedge fund manager. Wages for the top 1% have taken off like a rocket-ship, while wages for everyone else have stayed the same.

The fix: a global wealth tax to eliminate trust fund babies.

Just so we are fully informed, this is the argument from the other side of the aisle, courtesy of The Wall Street Journal.

My new favorite news resource Vox summed up Capital  here.

And finally, here is the author, Thomas Piketty, being interviewed on MSNBC.

(Originally published on Amanda Stanhaus’s financial literacy blog XO, Bettie.)